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T½denn­ p™ehled J&T Banky (16. - 20. kv›tna 2011)

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  • 1. WEEKLY SUMMARYMay 16 - 20, 2011Closew/w (%) 3M (%)YTD (%)y/y (%)52W Low 52W HighPX1,255 -0.80.62.59.91,097 1,276CZK/EUR 24.47 -0.2 -0.42.75.723.99 26.02CZK/USD 17.280.14.59.5 19.916.27 21.81PRIBOR 6M 1.57% 1bp0bp 1bp 5bps 1.47%1.58%10Y GB 3.75/203.83%4bps-22bps -7bps -26bps3.23%4.35%Prague Stock Exchange Closew/w (%)AAA Auto25.5 -1.4CME3900.0CZK m PX IndexCEZ947 -1.54,0001,300ECM 40-10.2Erste824 -0.8Fortuna117 -0.43,0001,250KB 4,150 -0.2KITD 2082.0NWR282 -0.22,0001,200Orco 2300.7Pegas4460.5PMCR 9,277 -1.31,0001,150TEF416 -0.3Unipetrol182 -3.0VIG961 -2.6 0 1,100EquityBonds21/0429/046/0513/0520/05CZK m6,026 3,986EUR m246.5 163.0Source: Bloomberg, PSE, ATLANTIK FTHEADLINES ONE-WEEK OUTLOOKNWR The 1Q earnings season is drawing to an end. Moreover,- 1Q11 results disappointing on all levelsno big macroeconomic data are on the agenda this week.- Highlights from conference call We therefore expect stagnation or slight decline.- Acceptance of share offer reaches 98% Markets will watch for further developments on commoditymarkets and possible unexpected meetings regarding theVIGEuropean debt crisis. S&Ps cut in the rating outlook- No surprise in 1Q11 resultsfor Italy should be responsible for negative mood inPegas Nonwovens particular at the beginning of the week.- Projection of 1Q11 resultsThe domestic earnings season will continue onErste Group Thursday with the results of Pegas, Orco and AAA- Shares traded ex-dividend Auto. We expect Pegas to announce a decline in EBITDA- Bank wants to repay participation capital by endof 5.3% to EUR 8.4m, mainly owing to the price-settingJunemechanism (higher polymer prices will be reflected first inCEZ costs and then in revenues). Investors will watch for a- Stress tests on German nuclear power plants commentary on potential acquisitions. We believe thenumbers alone will be neutral but an indication ofKIT Digitalacquisitions could trigger some activity.- New contract in ChinaThis week will not be very rich in macroeconomic releases.ECM A report of US durable goods orders will be released on- 1Q11 results worse on all levelsWednesday (exp. -2.4% from +2.5%) and the 1Q GDP- Company files its own insolvency petitionsrevision on Thursday (exp. to be revised up to 2.2% from- Astin Capital Management filed claim of CZK 1.8%). Last but not least, the University of Michigan3.1bn Consumer Sentiment Index is due on Friday (expectedstagnation at 72.4 points). In Germany the Ifo BusinessClimate Index on Tuesday and the 1Q11 GDP will befollowed.

2. EQUITY MARKET PRAGUE STOCK EXCHANGEMARKET NEWSThe week No. 20 was marked by volatile trading. The PX Index closed the week at 1,255 points, down 0.8%. Mediareports were all about commodities again, although the commodity markets got relatively stabilized. We must not forget thearrest of IMF chief Strauss-Kahn, which could complicate things are regards the voting on another rescue package forrelevant European countries, favoured by Strauss-Kahn, and investors perception of this development. Last but not least,the IPO of LinkedIn is worth mentioning as its shares posted an increase of over 100% on their first trading day.KIG Digital was the star of the week (+1.2%, CZK 207.5) on the PSE, still influenced by earnings results and positivecommentaries of the management on future consolidation. In addition, KITD got a large contract in China. By contrast,ECM was the most declining stock (-11.1%, CZK 40.2). The insolvency proceeding against the company is in progress.Further steps, taken with an aim to restructure the company, will probably continue to put pressure on the stock. Index Close w/w (%) 3M (%) YTD (%) y/y (%)52W Low52W High PX 1,255-0.80.62.5 9.91,0971,276 Wien (ATX) 2,768-1.1 -7.2-4.7 16.12,2173,001 Warsaw (WIG 20)2,8290.2 4.72.623.72,2702,933 Budapest (BUX)22,625-3.11.16.2 3.0 20,221 24,451 Euro Stoxx50 2,854-1.4 -5.81.711.12,4893,068 Dow Jones 12,512-0.72.38.124.39,686 12,811 S&P500 1,333-0.30.46.024.41,0231,364 Nasdaq 2,803-0.90.05.327.22,0922,874REPORTED EARNINGS RESULTSNWRThe earnings results for 1Q11 reported last Wednesday fell short of market expectations on all levels and we expect anegative market reaction. Only sales came in as expected by market. Since NWR had already published productionvolumes and prices in April, the sales were not surprising. In year-on-year comparison, sales were up 17.1% y/y at EUR384.8m, boosted by growing prices of coal and coke. The price of coking coal reached EUR 159/t in 1Q11 (+62.2% y/y)and steam coal was sold at EUR 70/t (+11.0% y/y). The price of coke even surged by 74.6% to EUR 337/t. The negativefactor was the proportion of coking coal and steam coal volumes, when the company produced more steam coal at theexpenses of the coking coal, its main commodity.Operating costs increased to EUR 335.4m (+10.8% y/y), less in comparison with our projection, as we had calculated withhigher personnel costs. Material and energy costs were up 11.1% y/y at EUR 99m, service expenses up 17.2% y/y atEUR 90.9m and personnel costs increased by 3.5% y/y to EUR 96m.EBITDA came in at EUR 81.6m (+42.3% y/y), falling short of market expectations of EUR 48.3m by 11.5% and almost inline with our projection (+2.4%). EBIT of EUR 37.6m (+110% y/y) was below market expectations by 22.1%. We hadexpected EBIT of 33.5m due to higher expected costs. The company generated net income of EUR 3.4m, after a loss ofEUR 15.6m in 1Q10, falling short of expectations of EUR 20.8m by 85.6%. We had expected EUR 7.9m. The notabledifference between the market consensus and the actual figure can be ascribed to the items described above. Thedifference compared to our estimate is due to higher-than-expected tax.The management repeated production and sales goals for 2011.EUR thousand 1Q111Q10y/ycons. J&TSales384,799328,563 17.1%384,300 384,576EBITDA 81,583 57,32442.3%92,20079,683EBIT 37,644 17,907110.2% 48,30033,534Net income 3,437-15,635n.a.20,800 7,900Source: NWR, J&T Banka, marketNWR held a conference call to discuss 1Q11 earnings results. The highlights are as follows:NWR sees strong demand in the region and expects prices of coal to be at high levels in 3Q11.The trend of lower volumes of coking coal should reverse in the second half of the year when the companyexpects a rise in production volumes, in particular in the fourth quarter. The full-year production target of 11mt 3. EQUITY MARKET PRAGUE STOCK EXCHANGEcoal (the same volumes of steam and coking coal) remains unchanged. In the subsequent year (2012) theproportion should change to 60:40 in favour of the coking coal.The Debiensko project in Poland is underway as expected. Mining should be launched in 2015/2016 (2.5mt), andit is expected that most (80%) of the coal will be coking coal. More information about the project will beannounced in June.After its reincorporation in Great Britain, NWR should be included in the FTSE index in June as expected.As to potential acquisitions, NWR is monitoring mostly Polish and Ukrainian markets. The IPO of JSW, thelargest miner of coking coal in the EU, will be the nearest event.The management also provided information about the outlook. It is confident that the goals for this year are achievable.Nothing major was said.VIGLast Tuesday Vienna Insurance Group (VIG) published its consolidated earnings results for 1Q 2011, which are inline with our expectations on all levels. Net profit reached EUR 109m, i.e. 7.8% y/y. Gross written premiums increasedby 2.9% to EUR 6,603m, mostly thanks to growth in the non-life insurance segment. Regarding earnings guidance thecompany reiterated that this year it expects pre-tax profit to grow by 10% and written premiums to grow in the low singledigits. Overall, we rate the results as neutral. The company again confirmed the stability of its performance. We considerthe affirmed guidance for this year quite conservative and the company should not have any difficulty beating it.EUR m 1Q 2011y/y 1Q 2010J&T Bankae MarketGross written premiums 2,6032.9%2,531 2,620 2,601Net earned premiums2,0791.5%2,047 2,097 2,170Investment income 253 -18.4% 310 265 273Expenses for claims incurred -1,680 -2.8% -1,728-1,731-Operating expenses-4572.1% -448-456 -Profit before tax 143 7.0% 133 138 139 Net profit*109 7.8% 101 107 106Source: VIG, projection of J&T Banka; *after minoritiesEXPECTED EARNINGS RESULTSPegas NonwovensManufacturer of nonwoven textiles Pegas Nonwovens will report 1Q11 results on Thursday 26 May.Earnings will be significantly impacted by a major increase in polymer price indices. We expect the higher prices to bereflected in operating expenses at once while the prices of final production should lag behind. Given the firming of thekoruna against the euro we expect a profit on the financial level.Total sales should be up 19.2% at EUR 41m compared to the same period a year ago. Sales volumes should stay aboutthe same but we expect increased product prices.Operating expenses will be affected by higher prices of polymers, the key raw material used by the company. Their pricegrew by about 14% in 1Q11. EBITDA should show a decline of 5.3% y/y to EUR 8.4m. Depreciation charges should bedown in comparison with previous quarters (approx. EUR 4m) at EUR 2.5m as Pegas extended the life-span ofmanufacturing assets effective from 1 January 2011, thus reducing depreciation and amortisation costs. That shouldboost EBIT, which we expect at EUR 5.9m (+23.3% y/y).Financial items should have a positive impact on the final result, mainly thanks to the FX effect. Thanks to theappreciation of the koruna against the euro we expect a gain from the revaluation of the euro-denominated debt (EUR2.5m). Debt service costs should reach EUR 0.9m. The company is projected to post net income of EUR 6.7m in 1Q11.The 12.0% y/y decline is due to a considerable increase in currency gains in 1Q10.Besides the earnings figures, investors will be interested in information about a potential acquisition. The managementis

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